Check the Item 7 estimated initial investment table
Key facts
- Human involvement
- YellowClose supervision
- How AI is used
- Extract the Item 7 table, including each type of expenditure, the amount or range, the method of payment, when it is due, to whom it is paid, the total, and the footnotes on refunds and franchisor financing. Do not build a later capital-expenditure budget.
- What the lawyer must review
- 16 CFR 436.5(g) requires a table titled YOUR ESTIMATED INITIAL INVESTMENT, in capital letters and bold type. The columns are the type of expenditure, the amount, the method of payment, when due, and to whom payment will be made. Pre-opening expenses, where applicable, include the initial franchise fee, training, real property purchased or leased, equipment and related build-out, opening inventory, and deposits, licenses, and other prepaid expenses. Other specific required payments are listed separately and by name. The "Additional funds" category covers other required expenses before operations begin and during the initial period. A reasonable initial period is at least three months or a reasonable period for the industry, and the franchisor describes the factors, basis, and experience used. Unknown amounts use a low-high range from current experience. A footnote states whether each payment is refundable and, if the franchisor or an affiliate finances part of the investment, the amount, down payment, annual interest rate, rate factors, and estimated loan repayments. The total incorporates any ranges. The lawyer checks the table against the quotes and the agreements. Item 7 is the opening investment, including that initial period. ABA Model Rules 1.1 and 5.3 and Formal Opinion 512 leave the review with the lawyer.
- Written for / version
- United States versionUS
Who does what
| Role | What they do |
|---|---|
| Assistance | Potential support includes extracting and organising information. Confirm the tool’s capability and permitted scope. |
| Lawyer | Set the scope, supervise the work closely, verify every part relied on, resolve omissions and exceptions, and approve the exact output. |
Checklist
- Trace every relied-on figure to its source, confirm dates and assumptions, and independently recalculate totals or derived amounts.
- Review operative clauses in the complete document, including definitions, cross-references, schedules and inconsistencies with the instructions.
- Confirm that the actual tool, feature and processing terms permit use of this information, including access, retention, training and disclosure conditions.
- Verify the applicable jurisdiction and the version of each relevant law, rule or instrument in force at the material time.
- Confirm the output against the client’s instructions and the complete relevant source material, including omissions or contradictions.
- Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use.
Related tasks
Draft or review a franchise disclosure document against the prescribed headingsCheck the franchisor's disclosure and any registration the jurisdiction requiresDraft or review a franchise agreement from the disclosure and the term sheetBuild a franchisee due-diligence issues list from the disclosure pack